Digesting Obama's Budgetary Kool-Aid

Tyler Durden's picture

Since the president's latest Kool Aid, pardon, budget, is making inexplicable waves in the media for some odd reason (why, we wonder - the realized and near-term projected deficit will be revised higher by about 50% within 3-6 months with 100% confidence), here are some additional interactive charts and forensic drill downs to help readers make some sense of the latest plate of steaming lies served piping hot by the propagandura. And no, there is absolutely no chance the deficit will be cut in half by the end of Obama's first term as had been promised at the peak of Obama's popularity.

First, an interactive historical chart of budgets from the WaPo:

And another, this time from the NYT:

And some additional forensic perspectives from John Poehling:

In comparing the president's FY 2011 and FY 2012 budgets, it's worth examining the assumptions
 
(1) For the 10 years 2011-2020, the FY 2012 budget assumes a lower interest rate each and every year ranging from -18 bp in 2020 to -104 bp in 2013
 
(2) In using the FY 2012 Projected debt and applying the interest rates assumed in the FY 2011 budget results in an INCREASE IN INTEREST EXPENSE OF $761 BILLION over the next ten years (or $76.1 bn per year).
 
In other words, by assuming a lower rate of interest paid on the public debt, the presidents 2012 budget saves $761 billion over the next ten years
 
See tables S-2 and S-3 in the FY 2011 & FY 2012 budgets

Additionally, while I readily concede there are things about the budgeting process I don't fully understand, how can the net interest rate paid on the net govt debt held by the public be LOWER than their projected 3m bill rate for a given fiscal year?
 
Just to double check, I calculated the average rate paid on Federal Debt using both the Annual Average debt & End of Period Debt.........either way, for FIVE YEARS in the FY 2012 Budget, the Avg Interest Rate paid on Net Debt is LOWER than their projected 3m Treasury Bill rate and for Four Years in the FY2011 Budget.
 
I fully appreciate that debt issued in today's low rate environment will still be outstanding in a couple years, keeping the rate low, however, given the average duration of our debt, it seems implausible the avg rates would stay low that long.

Lastly, and perhaps most important, is this comparison of the President's Budget with that from the CBO one short month ago:

The president's budget (released Feb 2011) embraces a much much more optimistic view than the CBO did just one month ago (Jan 2011).
 
Specifically, The OMB sees real GDP running 16% higher than the CBO during the next five years (3.76% CAGR vs. 3.24% CAGR) and 8.7% higher from 2016-2020 (OMB 2.76% vs. 2.54% CBO)
 
As detailed in the table below, the OMB also sees lower ten year yields (on avg 12 bp during the first five years and 10 bp the second ten).........The unemployment rate is lower in 2011 (10bp), higher in 2012 (20bp) and lower in 2013 and 2014 respectively 10 and 20 bp...........


h/t Chartporn.org